A warm welcome to more support for the RHI (Renewable Heat Incentive)

It is expected that the support, which is provided by the Government under the Renewable Heat Incentive scheme is likely to increase in the coming months. Along with this, the Government also confirmed that air -water heat pumps as well as industrial and commercial energy which are generated from waste will also be included under the Renewable Heat Incentive scheme. This change is likely to result in the re- adjustment of the tariff levels which are likely to increase the lower levels of uptake for certain technologies included in the scheme, such as geothermal energy, biomass, solar technology as well as ground sourced heat pumps. Once the approval is received from the Parliament as well as the EU state, these new tariffs will be made available by the start of spring in 2014.

The Minister for Energy, Greg Barker, stated that it is very important that the industry raises the maximum level of confidence, which will encourage investors to make investments in the market. Moreover, this will also help in reducing costs as well as resulting in sustainable market growth. Greg Barker provided this information in a written ministerial statement. He continued by stating that the changes are being made primarily in order to instigate significant growth in order to deploy numerous renewable heating technologies in the upcoming years, and according to the Ministry of Energy, these new tariffs will help in bringing about significant deployment, ultimately allowing the industry to grow in size and with top level investor confidence.

More importantly, the Government has also published its reply to several different consultations which were undertaken recently on increasing the scope of the non- domestic Renewable Heat Incentive, which had the title ‘Improving Support, Increasing Uptake’. It also published additional details of the domestic scheme, which was recently delayed and is now expected to begin at a later date in 2014. The response given by the government provides a clear idea of its decision making, as well as the reasoning behind the expansion of the non- domestic Renewable Heat Incentive.

For those who do not know, the Renewable Heat Incentive is the primary mechanism that is used by the Government in order to deploy renewable heat on a larger scale. Within the confines of the Renewable Heat Incentive, those applicants who have been screened and approved are given long term financial incentives as well as increased fiscal support in order to help them in using and expanding eligible and industry qualified methods for deploying technology that can generate heat. Non domestic users were introduced to the first phase of the Renewable Heat Incentive back in November 2011, and payments were provided every quarter to the applicants, spread over a total period of 20 years. Numerous qualifying technologies have already been approved and put in for deployment, such as biomass boilers, ground source heat pumps as well as solar thermal panels, which are by far the largest in number throughout the United Kingdom.

The Government had published a response to a number of different consultations which were carried out as well as numerous calls for evidence which were made throughout the year. In this published response, it revealed that it had not seen the levels of uptake which it had expected when the Renewable Heat Incentive scheme was first launched. Even though significant increases have been made in the overall uptake of heat from numerous related technologies, primarily from biomass installations, as well as a 7 percent increase in the overall renewable heat that was generated back in 2012, the total amount of heat that was generated in the calendar year 2013- 2014 is anticipated to be around the 1.2 TWh mark, which is just slightly above a third of what was initially anticipated when the scheme was launched.

Numerous changes have been proposed in the Government’s response. One of these is the introduction of a new tariff which will apply to deep geothermal heat, and is set at 5p for every eligible kilowatt hour that is generated. A specific tariff has also been introduced for biomass, combined with power and heat and set at 4.1p for every kilowatt hour that is produced. Air to water heat pumps have also received backing from the government, and their tariffs are set at 2.5p for every kilowatt hour that is generated. All installations which are run on biogas and have a thermal generating capacity of anywhere between 200 to 600 kWh will be getting a tariff of 5.9p for every kilowatt hour produced. However, those biogas installations which are able to produce more than 600 kWh, will be getting around 2.2p for every kilowatt hour produced.

Moreover, larger biomass installations that have an overall generating capacity in excess of 1MWth will be getting a slightly increased tariff of around 2.2p for every kilowatt hour produced while an increase is also expected in solar thermal energy, which will take the tariff for solar thermal to 10p for every kilowatt hour produced. A single tiered tariff for ground source heat pumps has also been set at 7.2p per kilowatt hour generated, while the previous banded tariff has been repealed. No tariff support has been announced for bioliquid heat and power and none as well for heating only air to air heat pumps or direct air heating using biomass.

Because the annual budget is fixed, all of the announced tariffs will follow a regression mechanism which ultimately means that over the passage of time, these annual budgets will begin to decrease. The rate of regression is likely to be dependent upon the uptake of the particular technology for which the tariff applies. The uptake of particular technologies is going to be monitored every quarter by making use of a number of triggers. Monthly updates will be published and a notice will be issued to the industry before any cuts are made by the government.